Adidas faces financial strain from the Kanye West Yeezy split, particularly affecting North American sales.
Adidas has confessed that the termination of its collaboration with Kanye West is taking a toll on the company, with North American sales suffering considerably.
The sportswear behemoth severed connections, along with dozens of other companies, with the designer and rapper, also known as Ye, in late 2022 following his anti-Semitic remarks on social media platforms. Under the Yeezy brand, West designed trainers, and Adidas disclosed that the loss of this business venture resulted in a €400m (£350m) reduction in sales during the year’s first quarter.
As a consequence, total revenue experienced a 1% decline.
Kanye’s lucrative deal with Adidas was cut off last year
However, the figures surpassed analysts’ expectations, and Adidas reported that, excluding the Yeezy business impact, sales had increased by 9%. Adidas revealed that it was reaping the benefits of the current “terrace” style trainer trend and experiencing “extraordinary demand” for its Samba, Gazelle, and Campus brands.
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Terrace styles first gained popularity among football enthusiasts in the 1980s when supporters began adopting designer fashion brands such as Fila and Sergio Tacchini. While Adidas acknowledged that its supply of such shoes was limited at the beginning of the year, the company intends to ramp up production in the coming months.
What was the Kanye West anti-Semitism saga all about?
Kanye West, now known as Ye, has faced severe backlash following his recent anti-Semitic remarks. The rapper’s controversial comments have led to numerous brands and agencies distancing themselves from him.
Adidas terminated its partnership with West, halting production of the Yeezy line, while Gap Inc removed Yeezy Gap products from its stores. Talent agency CAA and fashion house Balenciaga have also cut ties with West.
His ex-wife, Kim Kardashian, condemned his comments, stating, “Hate speech is never OK or excusable.” However, some have supported the rapper, including an anti-Semitic hate group, the ‘Goyim Defense League’ in the US, who draped a banner over a Los Angeles freeway bridge that read ‘Kanye is right about the Jews’. West has a history of making controversial statements, such as suggesting slavery was “a choice” and wearing a “White Lives Matter” T-shirt.
Despite his bipolar disorder diagnosis, commentators argue that mental illness cannot excuse offensive behaviour.
In its most recent financial results, Adidas announced that North American sales had plummeted by 20% due to the Yeezy business termination’s impact on the region. Adidas CEO Bjorn Gulden admitted that the loss of Yeezy is “of course hurting us”.
In October last year, the company terminated its partnership with West following the rapper’s anti-Semitic comments, stating at the time, “Adidas does not tolerate anti-Semitism and any other sort of hate speech.”
Kanye West then went on to collaborate with right-wing political figure Nick Fuentes, the self-styled ‘most banned man in America’.
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Adidas disclosed that should it choose not to “repurpose” its remaining unsold Yeezy stock, its operating profit this year would be reduced by €500m. The company faces a lawsuit from investors who allege that Adidas was aware of Kanye West’s troublesome behaviour years before the partnership’s dissolution.
Investors argue that Adidas failed to curtail financial losses and implement precautionary measures to minimise their exposure.
Adidas dismissed “these unfounded claims,” vowing to “take all necessary measures to vigorously defend ourselves against them.”
Despite the overall sales decline during the year’s first quarter, Adidas reported an operating profit of €60m, which exceeded expectations.
The company’s football, running, and tennis shoes experienced strong demand, contributing to a 1% growth in footwear revenues.
